New Zealand’s largest insurance group, IAG, has slightly improved its underlying profit margins on insurance products while passing on a doubling in the cost global reinsurance because of the Canterbury earthquakes.

In a presentation for investors in Sydney, IAG’s New Zealand chief Jacki Johnson said reinsurance costs had risen to 15 per cent of gross written premiums (GWP) in the first half of 2013 from around eight per cent in 2010.

Underlying margin in IAG’s insurance lines has risen to 11.5 per cent in the first half of this financial year, compared with 11.2 per cent before the Canterbury quakes, in 2010.

Underlying margin fell to 8.5 per cent in the 2011 financial year, when the brunt of Christchurch earthquake claims was borne, but bounced back to be even stronger last year than at present, at 11.8 per cent.

IAG’s managing director and chief executive Mike Wilkins said in a statement outlining IAG’s New Zealand growth strategy that the local unit sought ‘an underlying margin of around 10 per cent over the longer term.

‘We anticipate the underlying margin will be slightly higher in the short to medium term, consistent with the business’s recent performance,’ he said.

New Zealand now constitutes 17 per cent of the total GWP written annually by Australian-based IAG, having grown from just four per cent 12 years ago, when it entered the New Zealand market.

It bought State Insurance in 2001, NZI in 2003 and AMI in 2012.

Annualised premiums, based on the first half of this financial year, will come in at $1.9 billion.

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